By Max Clarke

David Kern, Chief Economist at the British Chambers of Commerce (BCC) comments on the strong services industry figures published today:

“These figures were stronger than expected and confirm our assessment that the UK economy will continue to recover. They also support our view that the negative impact of the severe weather on the Q4 2010 figures is even larger than the ONS has initially estimated. The rebound in the service sector over the next quarter could also be relatively strong, despite the impact of the VAT increase.

“We are concerned that recent positive figures could heighten pressure on the MPC to raise interest rates too early. The UK recovery is still fragile and the more forceful implementation of the Government’s austerity plan will inevitably have negative effects on business cashflows and consumer disposable incomes.

“While we support the Government’s continued deficit cutting programme, we believe it is important to ensure that the recovery continues and there are no setbacks. The Monetary Policy Committee must keep interest rates low for some time, and the Government on its part must make it possible for businesses to increase jobs, export and invest.”